Dumbed Down Taxes

After the year 1000, the dark age took a turn for the better. European cities, led by Venice, began trading with each other and, through Venice, the Middle East and Asia. The cities developed by importing, creating, and exporting innovations. Early medieval cities were had many disadvantages, but they benefited from subsidiary and fiscal accountability.

• Subsidiary is the principle that government works best – most responsibly and responsively – when it is closest to the people it serves and the needs it addresses.
• Fiscal accountability is the principle that institutions collecting and disbursing taxes work most responsibly when they are transparent to those providing the money.

The cities of the Roman Empire has lost these advantages in the desperate years before the collapse, when the imperial treasury extorted from them as much as it could and disbursed the money for schemes and needs according to its own, frequently crazed, priorities.

“… both subsidiary and fiscal accountability of public money have almost disappeared from the modern world, as if a cycle is returning to the Roman imperium, than principles that renewed Western Culture long after Rome’s failure.”

“Today, over almost all the world, major taxes, including those most remunerative and most economically informative, like income taxes based on the ability to pay, or those directly reflecting economic expansion, like sales tax, are collected either by sovereign governments or by their surrogates, provincial governments.”

The chapter continues to talk about how city sources of revenue are frequently inadequate to needs and how “senior” (state, provincial, or federal) governments come to their aid with various grants.

I could continue to discuss this chapter further, but I FINALLY managed to rent a copy of P&P. So I am going to wrap this discussion up.

The problem that the author sees is that tax revenues are largely misused. For instance, a city receives a grant for a light rail system, but all they really need is additional funding (much less than the cost of the light rail) for existing transit systems. Everything falls back to fiscal accountability. If the government spends the tax revenue wisely, then lower (and fewer) taxes would be necessary.